FX market ‘Dead,’ seven days
By Paneetha Ameresekere
Central Bank of Sri Lanka (CBSL)/Government of Sri Lanka (GoSL) coming down hard on exporter banks to artificially appreciate the market exchange rate (MER) seven market days ago, last Wednesday (28 April), paradoxically amidst depreciative pressure led by sustained uncertainty, saw the benchmark ‘spot’ academically being quoted at Rs199/200 levels to the US dollar in two way quotes in the interbank foreign exchange (FX) market at 4 p.m. yesterday with no trades however being executed for the eighth consecutive market day, sources told this reporter.
They said that the reason why no trades were done, even at the Rs199/200 levels to the dollar, yesterday as well, was because importers felt that by anticipated further moral suasion by the CBSL/GOSL, that there was room for such an administered ‘spot’ to strengthen further.
Nonetheless, even in this nihilistic situation, the MER has depreciated by Rs 11.50 (6.13-6.10 per cent) in two way quotes in the calendar year to yesterday and year on year (YoY) by Rs12-12.50 (6.42-6.67 per cent).
CBSL’s demand-pull inflationary face value money printing (FVMP) assets increased by Rs 4,623 million and its non-demand pull inflationary FVMP assets by Rs 4,177 million (equivalent to a US$20/92 million dip in the country’s foreign reserves) and, on the whole its FVMP assets increased by Rs 8,800 million (0.99per cent) to Rs 901,637.65 million yesterday. GoSL’s FVMP debt has been over Rs 0.5trillion for a record 123 consecutive market days to yesterday due to a lack of revenue. Conversions are based on CBSL’s administered ‘spot’ rate on Tuesday which was Rs 199.69 to the dollar.
Consequently net excess liquidity increased by 3.17 per cent to Rs 150,552 million yesterday.
GoSL’s money printing borrowing cost (MPBC) sharply decreased by 0.77 per cent (Rs 157.58 million) to Rs 20,436.71 million yesterday due to buying pressure of riskless, low returns Treasury (T) Bills and T Bonds in secondary market trading over preference to invest in the high returns, private sector, the engine of growth, due to uncertainty.